Banks foot million-dollar bill for year 2000 computer fixes

Preparing state banking systems so computers will be compatible with the year 2000 is a huge undertaking — one that is costing a great deal of effort and millions of dollars.

“It’s the biggest project that we have ever had,” said Mel Marietta, vice president of Hancock Bank. “It’s the highest priority that we have, and should be every bank’s highest priority. It is the only due date that won’t slip, the only due date that doesn’t pay back. The only thing you get is to stay in business.”

Computer codes must be rewritten because present codes won’t recognize the year 2000, which could cause programs to stop working or start delivering false data. Businesses and industries across the country are being forced to deal with what is nicknamed the “Y2K” problem. Fortune 500 companies have estimated it will cost $11 billion to deal with the Y2K problem.

The problem is that most computers use two digits to identify years, such as 98 for 1998. Entering the year 2000 is requiring four digits to correctly identify the year.

Banks and other financial institutions are ahead of some other businesses in preparing for Y2K because of federal regulations that require the banks to be in compliance by the end of 1998. Marietta said he started working on Y2K in 1995, and has been working on the issue full time for a year.

“We’re going to spend close to $4 million just on preparing to do the millennium stuff right,” Marietta said. “We are about 30 to 40% completed, and have developed a master plan to finish by the end of 1998.”

Marietta said because federal regulatory agencies want program changes in effect by the end of the year on all mission-critical computer system, banks are ahead of many other businesses dealing with the issue.

“Financial institutions are way ahead, and the U.S. is way ahead of Europe, Asia and Far East, which I hear are very much behind,” he said.

Bankers, though, have to be concerned not only with getting their own computers year 2000 compatible, but also making sure that their commercial customers are aware of the problem. If a business doesn’t deal with the issue, come January 1, 2000, they could be unable to do payroll, send out bills or do other administrative functions. That could lead to the business going bankrupt, and defaulting on the bank’s loan.

“It could be a massive problem,” said Harry Baxter, vice chairman of the Bank of Mississippi.

“There are people who claim to be year 2000 experts who say it could be the source of the next depression. I don’t subscribe to that. But it is hard to know how much of a problem it will be. There are little computers in almost everything these days.”

Baxter said Bank of Mississippi was able to deal with the problem more cheaply than other financial institutions because the bank was in the process of upgrading its computer equipment anyhow. “We are very fortunate because we are changing our operating system, which means all the new problems will come under year 2000 compliance,” he said. “We were going to do this anyhow because we needed to upgrade the system.”

Baxter said he has heard business people he generally considers well informed say they thought the Y2K issue was a concoction of consultants to make money.

“But it is a very serious issue,” Baxter said. “We feel we have fairly good grasp of the situation. We feel now our risk may be more tied to customers and vendors. We have almost 300 vendors we are dealing with to satisfy ourselves that they are compliant.”

Other state banks also have Y2K education programs, and are sending out information to customers. Trustmark National Bank sent out inserts in checking account statements telling customers, “The coming of the next millennium worries many people. But with Trustmark, you can be sure you banking business is up to date!”

Banks will be ready, and are hoping their customers will be, too.

“If a company, no matter how small, doesn’t do testing, it is going to have major problems,” Marietta said. “The smallest company has payrolls, accounts receivable and accounts payable. If they don’t test, they may not be able to pay people and send out bills. This is a nationwide problem and a worldwide problem. Everyone needs to work with everyone else to make sure we all make it.”

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